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US Dollar Retreat Amplified in Thin Holiday Trade

US Dollar Retreat Amplified in Thin Holiday Trade

Talking Points:

  • US Dollar turns broadly lower after disappointing trade data
  • Euro outperforms, correcting after yesterday’s outsized selloff
  • Thin liquidity remains a potential driver of kneejerk volatility

The US Dollar traded broadly lower against its peers as front-end Treasury bond yields declined. The move followed worse-than-expected trade data that showed the deficit widened to the biggest since March 2015 whereas economists projected it would narrow.

The outcome means relatively little for Fed policy bets, where the focus remains on the on-coming fiscal posture pivot. With that in mind, the greenback’s response is probably a reflection of holiday illiquidity rather than traders’ conviction.

The Euro outperformed, which was perhaps to be expected after yesterday’s kneejerk selloff. The swift recovery after that move seems like yet more evidence of lackluster participation amplifying moves that might otherwise have found little follow-through.

Looking ahead, the fast-approaching holiday weekend will probably sap a desire to commit to directional bets by the few traders still at their desks. However, if the past 48 hours have taught us anything, it is that sharp moves need little impetus in thin trade. With that in mind, caution remains prudent.

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** All times listed in GMT. See the full DailyFX economic calendar here.

--- Written by Ilya Spivak, Currency Strategist for

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DailyFX provides forex news and technical analysis on the trends that influence the global currency markets.